Wed 28 July, 2004

LONDON (Reuters) - People's appetite for credit eased in July for the second straight month, a report shows, in a sign that four interest rate hikes since November may be taking effect.

HSBC Bank's index has been designed to provide a measure of consumer financial confidence based on data collected from around 1,700 branches across Britain.

The non-seasonally adjusted index stood at 172 in July, down 3.0 percent on the year.

"It appears that the demand for new credit is slowing gradually suggesting that recent rate rises are finally making an impact. We expect more rate rises and hence fewer enquiries in the coming months," said John Butler, UK economist at HSBC.

The bank said on Wednesday that waning interest in unsecured loans was leading the decline but the rate of growth for enquiries about secured lending was also faltering.

Still, the sub-indices measuring demand for mortgage borrowing and equity withdrawal were significantly higher in July than a year earlier.

The mortgage borrowing index stood at 246 in July, up 8.4 percent on the year while that for equity withdrawal was up 10.4 percent at at 361.

"Although the rate of increase in mortgage enquiries is easing, it remains strong and is particularly so in the south of England, suggesting the end of the housing market is not yet nigh," said Dennis Turner, head of the bank's business economics team.

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